Abstract
This study investigates the impact of COVID-19 pandemic on the microstructure of US equity markets. In particular, we explain the liquidity and volatility dynamics via indexes that capture multiple dimensions of the pandemic. Our results suggest that increases in confirmed cases and deaths due to coronavirus are associated with a significant increase in market illiquidity and volatility. Similarly, declining sentiment and the implementations of restrictions and lockdowns contribute to the deterioration of liquidity and stability of markets.
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